Human Fallibility, Complementarity, and Fiscal Decentralization

This paper examines economic growth properties under alternative fiscal organizations when a bureau's decisions are fallible. A country consists of J jurisdictions, which need a public service. In a centralized government, one authority decides on services in every jurisdiction. In a decentralized government, J authorities are in charge of each public service. An authority can have high ability or low ability, and an authority with high ability draws a good project with higher probability. We first show that the decentralized government provides the same average quality of public services, with lower variance, than does the centralized government. We then apply this result to an economic growth model where the value of the Solow residual is a constant elasticity of substitution (CES) function of public services. We show that there is a critical value of the degree of complementarity below which fiscal decentralization is more desirable than fiscal centralization for an expected economic growth, and the decentralized government has a lower variance of GDP growth.     

Growth and Public Debt: What Are the Relevant Trade‐Offs?

The interplay between growth and public debt is addressed considering a Barro‐type (1990) endogenous growth model where public spendings are financed through taxes on income and public debt. The government has a target level of public debt relative to GDP, and the long‐run debt‐to‐GDP ratio is used as a policy parameter. We show that when debt is a large enough proportion of GDP, two distinct balanced‐growth paths (BGPs) may coexist, one being indeterminate. We exhibit two types of important trade‐offs associated with self‐fulfilling expectations. First, we show that the lowest BGP is always decreasing with respect to the debt‐to‐GDP ratio while the highest one is increasing. Second, we show that the highest BGP, which provides the highest welfare, is always locally indeterminate while the lowest is always locally determinate. Therefore, local and global indeterminacy may arise and self‐fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth, welfare, and macroeconomic fluctuations. Finally, a simple calibration exercise allows to provide an understanding of the recent experiences of many OECD countries.     

INCOMPLETE FINANCIAL MARKETS,IRREVERSIBILITY OF INVESTMENTS AND FISCAL AND MONETARY POLICY INSTRUMENTS*

In this paper, we analyse the use of fiscal and monetary instruments to improve long‐run welfare when productive investment is irreversible and uncollateralizable and there is no insurance. Only fiat money or government issued bonds provide self‐insurance. We demonstrate that an increase in precautionary savings reduces irreversible productive investment. Hence, subsidies to promote productive but irreversible investment should be financed in such a way that they do not reduce insurance capability. When lump‐sum subsidies are high, a consumption tax is likely to be more redistributive and thus more consumption smoothing than are the other sets of instruments analysed in our model.     

DUALITY WITH SECTOR‐SPECIFIC EXTERNALITIES UNDER SOCIAL CONSTANT RETURNS*

We develop dual approaches to quantity and price relationships of production in a general multisectoral model with sector‐specific externalities. The production of each good exhibits socially constant returns to scale but privately decreasing returns. We find that the Stolper‐Samuelson theorem holds for factor intensity ranking from the social perspective and that the Rybczynski theorem holds for factor intensity ranking from the private perspective. The price‐output dual fails to hold in general. Moreover, we re‐establish the Heckscher‐Ohlin theorem in the two‐sector case, as well as the factor endowment–factor price and price‐output comparative statics in the high‐dimension case under proper conditions.     

基于高频数据的ARCH类模型波动预测比较分析

Realized Volatility是在高频数据的研究基础上发展起来的度量波动率的新方法。本文以上证综合指数的高频数据为研究对象,采用滚动式样本外一步预测的方法对5种ARCH类模型进行了模型预测能力的比较研究。主要结论有:(1)Realized Volatility作为解释变量加入GARCH模型后能够提高波动预测精度。(2)GARCH-RV的波动预测值为Realized Volatility的无偏估计量。(3)沪市存在波动非对称性与很长的持续性。     

FISCAL DECENTRALIZATION AND ECONOMIC VOLATILITY: EVIDENCE FROM STATE‐LEVEL CROSS‐SECTION DATA OF THE USA*

This paper examines the implications of fiscal decentralization for economic stability. It has been discussed that fiscal decentralization reduces the variance of GDP growth, due to the greater diversification of performance across jurisdictions. We examine this theoretical result using a panel data set of the 50 states of the USA over the period of 1992–1997. We show that the theoretical specification of the production function is supported. We also show a negative significant relationship between fiscal decentralization and economic volatility. The results are robust when we take into account the endogeneity of fiscal decentralization.     

Stock Price Prediction Using Prior Knowledge and Neural Networks

In this paper we investigate ways to use prior knowledge and neural networks to improve multivariate prediction ability. Daily stock prices are predicted as a complicated real-world problem, taking non-numerical factors such as political and international events are into account. We have studied types of prior knowledge which are difficult to insert into initial network structures or to represent in the form of error measurements. We make use of prior knowledge of stock price predictions and newspaper information on domestic and foreign events. Event-knowledge is extracted from newspaper headlines according to prior knowledge. We choose several economic indicators, also according to prior knowledge, and input them together with event-knowledge into neural networks. The use of event-knowledge and neural networks is shown to be effective experimentally: the prediction error of our approach is smaller than that of multiple regression analysis on the 5% level of significance. © 1997 by John Wiley & Sons, Ltd.     

ENDOGENOUS FLUCTUATIONS IN TWO‐COUNTRY MODELS*

This paper investigates the interlinkage in the business cycles of large‐country economies in a free‐trade equilibrium. We consider a two‐country, two‐good, two‐factor general equilibrium model with Cobb‐Douglas technologies and linear preferences. We also assume decreasing returns to scale in the consumption good sector. We first identify the determinants of each country's global accumulation pattern in autarky equilibrium, and secondly we show how a country's business cycles may spread throughout the world once trade opens. We thus give capital intensity conditions for local and global stability of competitive equilibrium paths.